Day Traders Diary

2/23/23

The major averages rose in another volatile trading day as investors remained concerned about the path of the Federal Reserve's rate hikes. The S&P 500 rose 21 points or 0.5%, while the Dow Jones Industrial Average gained 108 points, or 0.33%. The Nasdaq Composite rose 83 points or 0.7%. The major averages are still on pace to end the week on a downturn, with the S&P 500 on track for its worst weekly performance since Dec. 16.

Investors will be keeping an eye out for the personal consumption expenditures report, which will be released at Friday 8:30 a.m. ET. The PCE report is one of the Fed's key inflation measures in measuring the impact of its rate increases on the economy.

Brendan Murphy, Head of Core Fixed Income, North America at Insight Investment, said that a recession is not necessary to achieve the Fed's 2% target for inflation. However, he says that

"While a recession would almost certainly hasten the return of inflation to target, it should not be considered a necessary condition," Murphy said. "While we have seen a significant improvement in realized inflation over the last 6 months, this was largely driven by base effects and the ongoing normalization of supply chains."

He added, "We are now in a period of low growth and moderating inflation. The big question is how far can inflation come down in that type of environment. It is possible that if supply pressures continue to abate in a period of below-trend growth, inflation will eventually return to the Fed's target. However, this period of below-trend growth might need to be quite long, which is why the Fed is talking about keeping rates restrictive for an extended period."

New home sales and consumer sentiment data will also be released on Friday morning.